This new battery was constructed in southeast Saskatchewan in the fall of 2022. Photo by Brian Zinchuk

CALGARY – The Canadian Association of Petroleum Producers (CAPP) reported on March 1 it is forecasting oil and natural gas investment in upstream production will hit $40.0 billion in 2023, surpassing pre-Covid investment levels. That represents $4.0 billion, or 11 per cent, more in additional spending across Canada’s economy than the prior year (all figures in Canadian dollars). In Saskatchewan, spending is expected to remain essentially flat.

“Investment into Canada’s oil and natural gas industry circulates back into the economy, benefiting all Canadians,” said CAPP president and CEO Lisa Baiton in a release. “The expected $40 billion of investment this year will be spent with businesses across the country, including hundreds of which are Indigenous-owned, support hundreds of thousands of jobs, and direct new spending towards improving environmental performance and emission-lowering technologies, such as carbon capture.”

“In addition, the oil and natural gas production from this level of industry spending will continue to generate tens of billions of dollars in royalty and tax revenues to governments to support investment into our hospitals, schools, social programs and infrastructure projects across the country,” adds Baiton.

CAPP represents the largest oil producers in Canada. CAPP’s member companies produce about 80 per cent of Canada’s natural gas and oil. It said, “Producers are expected to remain focused on disciplined investment with the increased spending going towards maintenance and incremental growth projects while also managing inflationary pressures which are impacting the entire supply chain. Additional spending is also expected to go towards environmental protection and emission reduction technologies such as advancing the development of carbon capture utilization and storage (CCUS). A report issued by BMO Capital markets showed Canadian oil and natural gas producers have invested an average of $1.2 billion annually since 2012 into research and development, much of that focused on reducing emissions. The report estimates in 2022 that investment rose to $1.4 billion and could exceed $2 billion by 2025. In addition, Canada’s upstream oil and natural gas industry is the largest investor in environmental protection, spending over $3.0 billion annually in areas such as biodiversity habitat protection, air quality management and water protection.”

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Conventional oil and natural gas capital investment for 2023 is forecast at $28.5 billion, while oil sands investment is expected to reach $11.5 billion.

The $40.0 billion mark represents the third straight year of consistent growth in upstream investment, delivering over 80 per cent growth since the 2020 low of $22.0 billion reached during the COVID-19 pandemic.

Lisa Baiton is the president and CEO of CAPP. Handout

CAPP CEO comments

“The year 2023 may be one of the most pivotal moments in time for Canada’s oil and natural gas industry. With an emerging liquefied natural gas export industry, the expected completion of the Trans Mountain pipeline expansion, and billions of dollars in emissions reduction investments waiting to be unlocked, Canada is positioned to play a much larger role in providing responsibly produced energy resources to the world,” said Baiton. “To capture this opportunity, industry and all levels of government will need to work collaboratively on critical pieces of policy to create the conditions for Canada’s oil and natural gas industry to continue to thrive for decades to come.”

“Major energy infrastructure projects under construction, like the Trans Mountain expansion, are incredibly important to Canada reaching its potential as a provider of secure energy to our trading partners. The completion of Trans Mountain will enable Canada to export nearly 900 thousand barrels of oil per day to world markets, helping to ensure Canadians get greater value for their natural resources while significantly increasing our role in the global energy market.”

“Reaching pre-Covid levels of investment is a significant milestone, signaling that the upstream oil and natural gas industry is continuing to grow investment to develop Canadian energy. As countries around the world struggle with the energy crisis, Canada’s oil and natural gas production is becoming incredibly important to helping meet global needs while providing a stable supply of energy for Canadians and driving increased investment into our economy.”

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“A secure energy transition requires investment into the current energy system concurrently with growing alternatives. In this transition we should be investing in the best forms of energy to meet growing demand. That list includes Canadian oil and natural gas which is produced with some of the highest environmental, human rights and emissions standards anywhere in the ”

“Globally, LNG is one of the fastest growing sources of energy and Canada is one of the few stable and democratic countries that have the reserves and capacity to become an exporter of natural gas for decades to come. One of the most effective ways Canada can help lower global greenhouse gas emissions and enhance global energy security is by exporting our lower emission LNG to countries that are relying on coal or Russian natural gas to power their economies.”

CAPP is predicting a slight increase in CAPEX in Saskatchewan this year. Photo by Brian Zinchuk

A good year now is half of a good year in 2014

While $40 billion is an improvement, it’s a far cry from the roughly $80 billion spent in the boom year of 2014. Asked about that, Elisabeth Besson, manager, media and issues for CAPP, told Pipeline Online, “Coming off nearly a decade of historically low commodity prices, it is positive to see a third consecutive year of growth and to reach that milestone of surpassing pre-COVID investment, particularly at a time when the Canadian economy is in need of private investment.”

Asked about the substantial inflation for oilfield services, and the economy as a whole, and if their forecast reflects that inflation, Besson said, “Yes, this is the third straight year of consistent growth in upstream investment, delivering over 80 per cent growth since the 2020 low of $22.0 billion reached during the Covid-19 pandemic. Producers are expected to remain focused on managing inflationary pressures which are impacting the entire supply chain and accounted in the forecast.”

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Saskatchewan

In 2023, the province is expected to maintain investment of about $2.7 billion compared to about $2.6 billion in 2022. That’s a 3.8 per cent increase, but does not keep up with the national annual inflation rate of 6.8 per cent for 2022.

Asked if Is there was anything else CAPP could say about Saskatchewan, Besson replied, “The natural gas and oil industry is proud of its role in Saskatchewan’s economy, preserving and creating jobs while generating significant increased revenues to government through taxes, royalties and land sales. CAPP looks forward to working with governments, at all levels, to create an environment where businesses can thrive and investments are encouraged domestically. We will continue to engage on creating the right conditions for investment to attract future projects and associated business and job opportunities.”

British Columbia

Changing and growing global markets for natural gas have translated into stronger natural gas prices over the past year. Producers in British Columbia are expected to grow investment in the province by about $1.0 billion in 2023, reaching a total of $7.2 billion. Investment in the province is expected to be helped by the recent agreements signed by the Province of British Columbia with several Indigenous Nations which satisfies the courts, establishes a process to manage cumulative effects and provides for resource development authorizations and a path towards long-term sustainable development.

Alberta

In Alberta, investment is expected to reach $28.0 billion in 2023, representing about 70 per cent of all upstream oil and natural gas investment nationally. The growth in investment is being driven both in the conventional and oil sands sectors.

Offshore

In Newfoundland and Labrador, offshore investment is expected to remain relatively flat at $1.3 billion in 2023. In 2022, Canada’s offshore development showed positive signs with the federal government’s environmental assessment approval of the potential Bay du Nord project as well as the announced restart of the West White Rose Project. Offshore investment in Canada is not growing at the same pace as the broader Canadian oil and natural industry or the global offshore industry, although Canada’s offshore holds significant potential with some of the lowest emission oil in the world as well as its proximity to global markets. The pending investment decision on the Bay du Nord project, and upcoming exploration programs will be critical to the future of Newfoundland and Labrador’s offshore industry.

 

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